3 April 1996 External T.I. 9611305 - DONATIONS OF INVENTORY

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Whether a tax receipt can be issued for donations of inventory.

Position:

Yes.

Reasons:

Receipts can be issued for gifts in kind, which include inventory.

C. Chouinard
XXXXXXXXXX							4-961130

April 3, 1996

Dear XXXXXXXXXX:

We are writing in response to your letter of March 7, 1996, wherein you inquire whether a donation program similar to the one described in the brochure attached to your letter exists in Canada.

The brochure invites corporations that have unwanted or obsolete inventory to donate this inventory to Educational Assistance Ltd. ("EAL"), a non-profit organization based in the United States that is qualified to receive tax-deductible contributions. EAL exchanges the property donated for scholarships within its national network of accredited colleges and universities. The brochure also indicates that EAL will follow a donor's guidelines as to the ultimate recipient of the donated goods and that the scholarships can be awarded in a donor company's name.

Although we are not aware of a specific donation program similar to the one described above, for Canadian tax purposes, gifts in kind, including inventory of a business, can be made to a charity. Where the charity is a university, the donation entitles the donor to a tax deduction, if the donor is a corporation, or to a tax credit, if the donor is an individual. We are enclosing for your information a copy of our pamphlet on gifts in kind.

Since it is not clear from the brochure how EAL exchanges the inventory donated for scholarships, we cannot comment further on the acceptability of such a practice, nor whether it would taint the gift. In addition, as regards a donor's directions with respect to a gift and the practice of naming a scholarship after a donor, you should note that, in order for a gift to be valid, the transaction may not result directly or indirectly in a right, privilege, material benefit or advantage to the donor or to a person designated by the donor. Further, the donee must have an unfettered right to use a donation as they wish. However, it is the Department's practice to view donations subject to a general direction from the donor as acceptable, provided that no benefit accrues to the donor, the directed gift does not benefit any person not dealing at arm's length with the donor and decisions regarding utilization of the donation within a program rest with the donee.

We trust these comments, along with the enclosed pamphlet, will be of assistance.

Yours sincerely,

R. Albert
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

Encl.

Y.S. 96-01917M